February Market - 'Blame it on the weather'
TREB reported February sales in the GTA slipped 2.4% from last year and new listings were down 6.2 percent. The average price was up 1.6% overall. “This varies greatly by area” says Kevin Larose of the Larose Real Estate Team. “If you have a well-priced house that has been nicely renovated in a coveted neighbourhood, it will sell quickly and most often, in multiple offers. Our job as professional real estate consultants is to assess how your property measures up to these 3 factors.”
Weak sales in the GTA in February were also driven by unusually bad weather. “We will have to wait and see what March brings to get a better feel for how the market is going to shape up” says Kevin. “The important factors to watch right now are what will happen with interest rates, and if parameters around the stress test will change.”
Interest rates aren’t expected to rise again this year. On March 6th, the Bank Of Canada decided to hold its key interest rate at 1.75% - a complete reversal of what was expected from the end of 2018. The BOC is evaluating its ‘new neutral’ – the level at which interest rates neither stimulate or dampen economic growth. This rate has historically been set around 2.5 to 3.5 %. The next BOC rate announcement is scheduled for April 24th and given the current economic outlook, the BOC may need to strike quickly with a rate cut this spring.
Toronto realtors have made a point of calling out for changes to the federal stress test rules which have already helped cool the market and bring down home prices. Approximately 10% of buyers no longer qualify for a mortgage with the big banks and home buyers desperate to enter the market are seeking out unsecured lenders. It has also created a shortage of rental properties as buyers not able to qualify are looking to rent. According to data from CMHC- homes in the GTA area are 5.3% less expensive than they were last year at this time. This adds up to a $40,000 average cost decrease. The context in which the stress test was introduced is no longer relevant as interest rates have already increased by 1 percentage point. Home buyers- especially first time buyers have had to prove they can afford to purchase a home based on a 2 per cent higher than actual rate on a 25 year amortization period. “The qualifying standards need to be adjusted to reflect the rate increases that have already taken place. This would only make sense- especially for first time buyers who have finally saved up enough to buy” according to Kevin.